First time Commercial landlord need direction on "TI" in a deal

[Gavin Rogers]

I am the owner (Inheritor) of a building that used to be a bar in Phila. Pa. Someone is interested in leasing the property but it needs appx. 70K in work to get it where they want it. I understand I am obligated to pay back the money invested in my property. My question is how can I pay it back with out taking money directly out of my pocket? Could rent abatement be a tool? What options do I have. The tenant is willing to pay the TI up front. 

[Damon DiPlacido]

Gavin,

Tenant Improvement Allowance (TIA) is a negotiated item, so it's only obligated if you agreed to it. For most small / individual operator Tenants, I would tread carefully on agreeing to any TIA to the Tenant. It does seem like most Tenants today are accustomed to asking for TIA from the Landlord, so if they push hard for it, your initial position should be to offer some 'free rent' after opening rather than writing a check; if they push back on this, then if the deal terms make sense (high enough rent, long enough term, strong enough financials/signature), and it's a good concept, perhaps offer a combo of some free rent and a little TIA. Also, keep in mind, if you do agree to provide some TIA, NEVER pay it up front, it should be paid as a reimbursement typically within 30 days of opening of business, receipt of first month's rent, and receipt of all lien waivers. Also if you make a TIA payment, you should negotiate what the money can go towards (e.g., permanent fixtures).